American Airlines Group Announces Pricing of Unsecured Senior Notes

Discussion in 'American Airlines' started by jimntx, May 17, 2019 at 7:41 AM.

  1. jimntx

    jimntx Veteran

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    #1 jimntx, May 17, 2019 at 7:41 AM
    Last edited: May 19, 2019 at 9:57 AM
    FORT WORTH, Texas, May 16, 2019 (GLOBE NEWSWIRE) -- American Airlines Group Inc. (AAL) (the “Company”) today announced that it priced $750.0 million aggregate principal amount of unsecured senior notes due 2022. The offering was increased from a previously announced size of $350.0 million aggregate principal amount of notes. The notes will have an interest rate of 5.000% per annum and are being issued at a price equal to 100% of their face value. The notes will be guaranteed on a senior unsecured basis by the Company’s direct wholly-owned subsidiary, American Airlines, Inc.

    The Company intends to use the net proceeds from the offering to fund contributions to its pension plans.

    The article was considerably longer. A lot of Finance gobbledegook. (Remember I was a flight attendant. I was paid to be cute not smart.) However, it does raise a few questions that maybe some of you can answer.

    1. What pension plans? Are they talking about the frozen plans that should have been funded years ago? Or, perhaps still active executive pensions?

    2. Does this not increase the debt load of the company? I thought the debt load (secured by airplanes) was the reason the stock price is so depressed as it is. And, this is unsecured debt! Who gives a company money to pay its obligations in a deal that has no guarantee of getting any of it back?

    3. 5% interest rate is pretty attractive at this time. (My bank just paid me 0.05 cents monthly interest on $7000 deposit. I'm thinking maybe I should start looking at villas in the south of France.:rolleyes:) Question is do we know the company is going to earn that kind of money that we will have the ability to pay that 5% interest?

    Just asking.
     
  2. CremaDiLimone

    CremaDiLimone Veteran

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    the company is profitable, not generating the cash flow as other airlines..i still don't get this move.

    - i suspect this has something to do with the revenue/profit hit off the 737 max groundings.

    - the 5% is needed to attract buyers. it's all supply and demand..this debt is not secured, so why take a risk buying it? 5% should be enough to attract risk takers. is the company going to go belly up in the near future? no.

    it's like a nation's debt and selling treasuries. israel is constantly threatened with destruction, so, israel has to pay higher rates on it's bonds to attract buyers. check israel's 10 yr. as opposed to the usa's 10 yr. or a germany.

    israel has to pay more because it may not be around to pay off it's debts, while a greece has problems with revenues to pay it's bonds. those 2 nations pay much more on their bonds than a usa or germany. same with corporations.

    - also, the airlines got a break from the govt., in that they didn't need to fund their pensions at previous levels. the airlines took advantage of the break. this happened a few years after 9-11...everyone else filed BK and terminated their pensions, aa didn't.
     
  3. WeAAsles

    WeAAsles Veteran

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    AA tried to and was rebuffed let’s not forget.

    And if they’re going to take on any extra debt at least I’m glad to see that debt being put towards our Pensions.
     
  4. CremaDiLimone

    CremaDiLimone Veteran

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    i believe there is some connection with the $7 billion threshold of cash vs. anything over $7 billion will go directly to the shareholders, and not the employees.

    aa is around $7 billion. what is the difference between $7 billion cash on hand vs. 6.65 billion cash on hand? the company decided not to burn $350 million of it's cash on making this pension contribution.

    are they this desperate to reward shareholders in the short term future where it will cost them an additional $50 million in interest on these notes?

    doesn't make sense. what made sense was parker saying something about "we're looking at increasing the dividend". that will have to happen..southwest just hiked their's..compared to dl, aa is pitiful at .40 cents a year.

    these are the things that cause wall street to wonder about our top level management team. the company had a few setbacks in this key year of 2019. it's key because this is the year the company has told the world that all the merger synergies will start paying off on the balance sheets...and with CapEx dramatically slowing down next year, aa will have a much greater cash flow.

    as far as the set-backs, the 737max issue is not their fault. the overhead bin issue and monies lost is their fault.
     

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